WH to Congress: Let’s repeal a part of ObamaCare, mm-kay?

posted at 1:36 pm on September 14, 2010 by Ed Morrissey

The momentum to repeal ObamaCare picked up a little momentum in an unlikely place: the White House. After facing a deluge of criticism for new tax records mandates that threaten to drown both the IRS and small businesses, Congress finally scheduled an attempt to remove that portion of the new law. Yesterday, the Obama administration quietly asked Democrats to expedite the process and eliminate the 1099 requirements:

Facing a backlash from small businesses over a new tax-reporting requirement in the healthcare law the president signed in March, the Obama administration is embracing the first change to the landmark legislation.

In a letter to Senate leaders, Health and Human Services Secretary Kathleen Sebelius and Treasury Secretary Timothy F. Geithner urged the Senate to back a proposal to scale back the new reporting mandate.

The law requires businesses to report to the Internal Revenue Service transactions worth more than $600, a provision that was added to the law to raise an estimated $17 billion over a decade and offset the cost of expanding coverage to millions of uninsured Americans.

The small item garnered little attention when it was inserted into the gargantuan legislation.

Well, why did it garner “little attention”? The media may have missed it, but we’ve been talking about this for at least eleven months. Cato reminded everyone about it in April, and yet it has taken five months for the White House to conclude that it will create huge costs and administrative burdens for business and the IRS alike.

Had this bill been processed normally through committees and debated honestly, this flaw would have gotten immediate attention. Instead, the ObamaCare bill got written in back rooms, rushed to the floor of both chambers, instead of developed in the normal process. The excuse was that it was too important to get vetted, and too time-critical to delay it or pass it in components. Well, this is what happens when Congressional leadership says that they have to pass a bill to find out what’s in it, and when they drop 2800 pages of legislative text on members just 48 hours before floor votes.

What remains to be seen is how Democrats plan to replace the $17 billion they assumed they would get from the provision. Two months ago, they seemed perfectly content to blame Republicans for not hiking other taxes to replace the revenue. The Wall Street Journal notes this problem, and another issue with the White House’s favored solution:

Most Democrats now claim they were blindsided and didn’t understand the implications of the 1099 provision—which is typical of the slapdash, destructive way the bill was written and passed. As the critics claimed, most Members had no idea what they were voting on. Some 239 House Democrats voted to dump the 1099 provision in August, and the repeal would have passed except Speaker Pelosi rigged the vote procedurally so it needed a two-thirds majority. She thus gave Democrats the cover of a repeal vote without actually repealing it.

In the Senate today, Nebraska Republican Mike Johanns will offer his amendment to scrap the new 1099 rules altogether. But the White House is opposing this because it fears it would set a precedent for repealing the larger health bill. Over the weekend the Treasury Department pronounced the Johanns amendment “not acceptable in its current form.”

Yesterday the White House endorsed a competing proposal from Florida Democrat Bill Nelson that would increase the 1099 threshold to $5,000 and exempt businesses with fewer than 25 workers. Yet this is little more than a rearguard action in favor of the status quo; the Nelson amendment leaves the basic architecture unchanged while making the problem more complex.

Businesses would still have to track all purchases, not knowing in advance which contractors will exceed $5,000 at the end of the year. It also creates a marginal barrier to job creation—for a smaller firm, hiring a 26th employee would be extremely costly. The Nelson amendment also includes new taxes on domestic oil production, as every Democratic bill now seems to do.

Let’s just reflect on the fact that Democrats now claim that they backed a bill in the face of overwhelming opposition from voters, and now say they didn’t understand it when they did. And instead of cutting the spending in the bill, Democrats insist on raising taxes to cover their own mistake. If that’s not an election-year ad, I don’t know what is.

Blowback

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PENSACOLA, Fla. (AP) — A federal judge said Tuesday he will likely dismiss only parts of a lawsuit by 20 states challenging the Obama administration’s health care overhaul as unconstitutional, though he didn’t specifically say what portions.

Dems may have realized that the new 1099 reporting rules were going to bring the country dangerously close to mass disobedience of government regulations. (Any bad words in there?)

slickwillie2001 on September 14, 2010 at 3:22 PM

yeah, Dems know that they can be the only ones breaking the law around here. Their “managed decline” plan is analogous to suffocating the US with a pillow….they don’t want us screaming too much while we’re dying otherwise they’ll get too skeered and wee wee themselves or someThing.

Here’s the way you justify the $17 billion: businesses are taxed when they profit. The ridiculous 1099 requirements would reduce small business profits, ergo reducing government revenues. At the worst the repeal will be deficit neutral and at best, the government actually receives more revenue by repealing this mess.

My brother is a CPA with many small business clients, and is a small business owner himself. He told me this weekend that this new rule will be the straw that breaks the back of millions of small businesses that are barely hanging on now. It’s a nanny-state rule which assumes that small business owners and those who sell to them are all cheating on their taxes, and will be extremely costly for small business. It will help my brother and all CPAs, but he would rather not have that kind of help.

He also told me that taxes are not that important to small business right now, it’s the layer upon layer of regulations that are strangling them.

He also told me that taxes are not that important to small business right now, it’s the layer upon layer of regulations that are strangling them.

rockmom on September 14, 2010 at 4:44 PM

My niece who is studying for her CPA and works with a firm that specializes in helping small businesses meet regulatory demands said the same thing. The regulations are killing small businesses. And even little irregularities which used to get a warning and a repeat visit by regulators, not cause heavy fines with no warning. She said that it used to be that new customers would come in hoping to avoid penalty. Now they come in already reeling from the charges.

My niece who is studying for her CPA and works with a firm that specializes in helping small businesses meet regulatory demands said the same thing. The regulations are killing small businesses. And even little irregularities which used to get a warning and a repeat visit by regulators, not cause heavy fines with no warning. She said that it used to be that new customers would come in hoping to avoid penalty. Now they come in already reeling from the charges.

Lily on September 14, 2010 at 5:29 PM

That kind of firm is one of the few growth industries in our country, unfortunately.

The private sector is generally more incompetent than the public sector.

crr6 on June 12, 2010 at 12:08 PM

You believe the most incredibly stupid things. Where do you get such stupid ideas stuck in you head? I think you watch too much hollywood and their idea of corruption and failure. They always blame business, but I am at a loss to figure out much corruption in private enterprise that doesn’t correct itself and and any instance of government in places it doesn’t belong where they are not the reason for the worst corruption and failure. Think Fannie Mae if you can’t figure out what I am talking about. That wasn’t private business. That is all thanks to stupid liberal politicians that think like you.

Been a BUSY day, here, and haven’t read the prior posts, but can someone please explain to me how FILING these ‘brings in “$17 billion over 10 years” ???
Sure is one big headache, (for OUR bizz, for sure !) but how does this bring in money ?
*scratches my tired, aching head*